UK Government Faces Challenges in Managing IT Supplier Contracts, Lacks Digital Commercial Skills

Introduction

The UK government is striving to modernize its digital infrastructure, but it faces significant challenges in managing its IT supplier contracts. With ambitions to save £45 billion ($55 billion) in productivity through technological advancements, recent findings by the National Audit Office (NAO) reveal critical flaws in the government’s approach to handling tech contracts. These shortcomings are particularly evident in the civil service's adoption of innovative digital technologies, questioning whether the government is equipped to handle such large-scale projects efficiently.

Inadequate Technical Evaluation

A key issue identified in the NAO report is the government’s insufficient technical evaluation of contracts. Spending £23 billion ($28 billion) annually on technology, authorities often downplay potential technical risks, leading to unforeseen complexities post-contract. This lack of foresight results in challenges too fundamental for standard change control strategies, causing project delays and budget overruns.

Shortage of Digital Commercial Skills

The newly appointed chair of Parliament’s spending watchdog, Geoffrey Clifton-Brown, highlights a severe shortage in digital commercial skills within government circles. This deficit means that departments are unable to act as 'intelligent clients' to effectively manage digital suppliers. Issues are compounded by the central government failing to provide consistent guidance, further exacerbating inefficiencies in handling IT services and software procurement.

Case Study: HMRC and Accenture

This problem is illustrated by a recent incident involving His Majesty’s Revenue & Customs (HMRC) and Accenture. A supplemental £35.2 million ($44 million) contract was awarded without competition for a project initially valued at £70.4 million ($88 million). Accenture, tasked with disaggregating the National Insurance and PAYE System (NPS), claimed unexpected project work warranted the additional cost. Critically, the government admits that it cannot change suppliers due to the NPS’s complex technical nature, raising questions about its dependency on a small cohort of IT service providers.

Impact on Supplier Relations

The government’s inadequate management and strategic oversight have led to over half a billion in non-competitive contracts awarded by HMRC over the past five years. Most notably, the Aspire program continues to burden taxpayers with high costs, with contracts worth £3.8 billion ($4.7 billion) awarded to former Aspire suppliers like Accenture, Fujitsu, and Capgemini. This not only demonstrates the administration's lack of competitive procurement but also highlights the challenges in breaking dependence on a limited pool of IT suppliers.

Looking Ahead

For larger technology suppliers, maximizing revenue and margin from every deal is a full-time endeavor. Meanwhile, the UK government’s lack of digital commercial acumen means these suppliers have an upper hand. Moving forward, bolstering digital skills within the public sector and implementing effective contract management strategies are imperative for achieving technological objectives. The government must focus on becoming a knowledgeable client to manage large-scale IT projects more efficiently and economically.